2026 Economic Summary for Businesses

• Interest Rates: 3.75% (Down from 5.25%).

• Inflation: ~3.2%.

• Insolvency Rate: 1 in 193 companies (51.7 per 10,000).

• Main Risk Sectors: Hospitality and Retail accounted for 30% of all insolvencies in the year to January 2026.

A total of 23,938 company insolvencies were recorded across the full year of 2025 - the highest annual figure since 2009 - with early 2026 figures showing that while monthly volumes have begun to stabilize, they remain 14% higher than pre-pandemic norms.

Small and medium-sized enterprises (SMEs) have been particularly hard hit, accounting for ~80% of all cases as they struggle with persistent cash flow issues and late payments.

But now as the economy struggles and inflation pressures persist, many businesses are closing down rather than looking at business loans or other ways to support their organisation.

Nicky Fisher, president of insolvency and restructuring trade body R3, said: "More and more businesses are running out of road or rope. Directors are choosing to close down their firms while the decision is still theirs."

NimbleFins has guides on 18 types of small business financing, including invoice financing, small business loans, bridging loans and commercial mortgage.

Our Business Loans section also has expert tips such as how to write a business plan to get investment or loan, plus reviews of business loan providers.

While 2025 saw a total of 18,525 Creditors’ Voluntary Liquidations (CVLs) - a record high since the series began in 1960 - the data for January 2026 shows a 17% decrease compared to the same month in 2025. Despite this monthly dip, compulsory liquidations reached their highest annual level since 2012, highlighting a shift where more creditors are taking formal action to recover debts.

While UK inflation has since cooled to 3.2% and the Bank of England cut interest rates to 3.75% in early 2026, many businesses are still reeling from the 'lag effect' of the prolonged 5.25% peak. For those currently seeking to refinance, the era of 'cheap money' is firmly over, and the increased cost of borrowing continues to squeeze margins for those operating on thin margins.

Breathing space from personal loans

The demand for the Government’s 'Breathing Space' scheme reached record levels in 2025, with 89,130 registrations recorded - the highest annual total since the scheme launched in 2021. This includes 1,317 'Mental Health Crisis' breathing spaces, which provide vital protection from creditors for the duration of a person’s crisis treatment plus 30 days. However, January 2026 saw a 39% drop in registrations compared to the previous year, largely due to major debt advisors updating their eligibility criteria.

Personal insolvencies rose by 7% in 2025 to a total of 126,240 - the highest level in 15 years. Of these, Individual Voluntary Arrangements (IVAs) accounted for 57%, while Debt Relief Orders (DROs) reached a record annual high of 37% following the abolition of the £90 application fee in 2024. Bankruptcies remained relatively low at just 6% of the total, though they began to rise in early 2026 as the Insolvency Service cleared a backlog from its new case management system.

Read more: 0% credit cards v cheap personal loans: Which wins for cheap borrowing?

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